IVCA 2017 Awards Dinner Profile: Recipient of the Stanley C. Golder Award is John Hatherly, Founder & Managing Partner of Wynnchurch Capital

IVCA 2017 Awards Dinner Profile: Recipient of the Stanley C. Golder Award is John Hatherly, Founder & Managing Partner of Wynnchurch Capital

November 22, 2017

In a little less than two weeks, the Annual IVCA Awards Dinner will be in the spotlight – Monday, December 4th, 2017. The yearly event honors the persons and organizations that have made an impact both within the association, the broader VC/PE industries and the community at large. The individual award recipients were recently announced, and the Stanley C. Golder Award honoree is John Hatherly of Wynnchurch Capital.

The Stanley C. Golder award, named for one of the Midwestern pioneers of Private Equity, honoring individuals who have made profound and lasting contributions to the Private Equity industry in Illinois. The honoree is recognized as a leader in the industry, has a high level of personal and private ethnical standards, and a history of achievement that reflects those standards.

John Hatherly founded Wynnchurch Capital in 1999, where he currently serves as Managing Partner. Prior to founding Wynnchurch, he had a 12 year career as a senior executive at GE Capital’s Merchant Banking Group. Before that position, Mr. Hatherly spent three years in banking with First National Bank of Chicago and BankOne.

Mr. Hatherly has played a lead role in more than 200 investments totaling over $15 billion... including acquisitions, buyouts, recapitalizations, project financing and leasing. He serves on the Board of Directors of Groupe Moreau, Ironform Holdings Co., Surepoint Holdings, Inc., WC Foss Investment Inc., Stampede Meats, Inc., Indiana Limestone, Inc., the University of Notre Dame’s Student Athlete Advisory Council, and the University of Wisconsin’s Business School Innovation Council. He received his Bachelor of Arts degree from the University of Notre Dame, and his M.B.A. from the University of Wisconsin.

In anticipation of the December 4th Awards Dinner, the IVCA interviewed John Hatherly, the recipient of the Stanley C. Golder Award.

IVCA: Congratulations on the Stanley C. Golder Award. What does it mean to you to be honored by your peers in the Venture Capital and Private Equity industries?

John Hatherly: It is a great honor to receive the Stanley C. Golder Award. In fact, I am especially humbled to be included in a group of such distinguished individuals who have previously received the Award. I have worked tirelessly with my Partners and colleagues at Wynnchurch to build a Private Equity firm that is focused on improving businesses, so the Stanley C. Golder Award is particularly satisfying as it validates the efforts of our entire Wynnchurch team over the past 17 years. The Award recognizes those efforts and I am proud to work alongside such talented and committed individuals at Wynnchurch, who share this award with me for our collective efforts.

IVCA: Can you identify a particular aspect of your career before Wynnchurch that especially prepared you for fund investing success?

Hatherly: I had the good fortune of working at GE Capital for twelve years prior to founding Wynnchurch in 1999. GE Capital provided me a wealth of unique experiences and lessons learned... which I believe were critical to the success that I have enjoyed in the Private Equity field. GE Capital’s culture was driven by a robust entrepreneurial spirit, but underpinned by rigorous financial controls. That delicate balance between entrepreneurialism and financial rigor is alive and well at Wynnchurch.

At GE Capital I had the opportunity to work in leasing, debt, M&A and equity. I personally was involved in over 150 leveraged buyouts, in which we provided debt and/or equity. Needless to say, I have probably encountered every issue ever dealt with in Private Equity and interacted with scores of executives which helped to shape my views on leadership. I was fortunate to have worked for great leaders at GE Capital such as Denis Nayden, and some of the best credit minds including Jim a Ungari and Pete Keenoy. I was mentored to be a skeptical investor, which allowed me to develop a unique investment filter when analyzing investment opportunities, and has served me very well in the world of turnarounds

IVCA: Since you have a long experience evaluating both, how do you assess a prospective investment and management team?

Hatherly: At Wynnchurch, we employ a fairly simple investment approach which is premised on first, buying well positioned companies. Second, not overpaying or over-leveraging the companies we buy... we tend to buy cyclical businesses and we need to presume they will cycle down during our ownership. Third, operational opportunity must exist, we like businesses that are facing challenges. Finally, partnering with the right leadership teams to drive change at the underlying business.

As you would probably guess, management is the most important driver of success, and in most cases the key reason for underperformance. We look for our CEOs to be well versed in the use of quality performance tools, as many of the businesses we buy are operational turnarounds. Our CEO’s will have worked at firms like GE, Honeywell, Emerson, Dover, Allied Signal and other companies of similar ilk. They will have had profit & loss experience, they will invest alongside us and they will view us as partners. Lastly, they will be open to new ideas and they must be ethical.

Our culture at Wynnchurch is based on Teamwork, Trust and Transparency. Our portfolio company leadership teams must share those core values. Finally, all our partners must meet the CEO and CFO candidates and give them their blessing, if we are to partner with them. Finally, we employ a third party Human Resources firm to reaffirm our assessment of management.

IVCA: After an investment is implemented, what is the key to assuring that that the acquisition plan is robust and on track?

Hatherly: We spend significant time, resources and dollars in our diligence efforts and activities. The purpose of our diligence is to validate the representations that have been made by the seller but just as or even more importantly, to develop and hone our investment thesis. That thesis includes a rigorous 100 day plan and a long-term plan. We view these plans as the ‘blueprint for change.’

The 100 day plan is generally more specific and tactical in nature. As with most turnarounds we are looking to stabilize the business – and stop the bleeding in many cases – during this period. The long-term plans tend to be more focused on strategy to drive growth and improve profitability. In many cases we use third party experts to assist us in developing components of the plans, and frequently they play a role in the implementation of the plan. To ensure the plans are on track we use policy deployment tools to measure our progress. If you cannot measure the action you cannot manage it. Finally we have a partner assigned to every deal. That partner is held accountable for the success or failure of that investment.

IVCA: What are a few of the biggest changes you’ve observed in the industry during your career? How have those changes affected your firm’s strategy?

Hatherly: Private Equity has evolved and matured over the past seventeen years. It is far more competitive today due to the ever growing amount of capital in pursuit of Private Equity... this trend is likely to place downward pressure on PE returns across the industry. However, it will also create unique opportunities for the more astute investors.

Many new entrants  – and many long time participants – appear to be paying irrational multiples for peak earnings of cyclical businesses. I expect this will create opportunity for patient investors who have the intellectual capital and access to great leaders to exploit these opportunities. Our firm has not really changed other than we have grown our capital under management and the size of our investment and operational teams. We remain disciplined in our approach to value and people, which I believe best explains our success over the past seventeen years.

IVCA: If you had to gaze into a crystal ball, what do you think the industry will look like in 20 years?

Hatherly: Hopefully I will still be an active partner at Wynnchurch 20 years from now and will help shape what our firm looks like in 2037... though I am not sure my younger colleagues will want a 78 year-old offering advice in a rapidly changing world. Suffice it to say, greater amounts of capital will continue to enter the space and markets will continue to become more efficient. Technology will drive this change at an even faster clip than it does today, and it will remain a challenge to find great leaders.

Further, I expect the PE market will become more institutionalized, and many PE firms will be owned, or partially owned, by these larger institutions. Family offices will play a bigger role due to the enormity of wealth being created, and it will be more difficult for first time funds. I hope I am around to witness the changes, whatever they may be.

IVCA: With the industries adapting and changing every year, what advice do you have for new VC/PE professionals?

Hatherly: My partners Frank Hayes and Chris O’Brien are much better at mentoring the young professionals in our firm. I tend to lead by example and generally lack the patience they have or the willingness to teach... which thank God they possess. However, there are two pieces of advice that have served me well over the years. Jay Jordan, who I have great admiration and respect for, told me the first time I met him that ‘Private Equity is a shoe leather business.’ I firmly believe that people prefer to conduct business with people they like. The more people you connect with, the greater the likelihood you will find an opportunity – after all, it is a numbers game. Thus, you need to be out of the office meeting people, or in other words burning holes in your shoes. I will never forget Jay’s advice, and I believe our origination efforts are the lifeblood of our firm.

The other advice I would offer is discipline. Be disciplined in your investment approach and don’t alter it based on a change in markets. Know what you are good at and stay true to that approach. Trust me, we have had some dark times at Wynnchurch, but we did not panic and stuck with our disciplined investment approach. Markets will rise and fall, just make sure you are positioned to capitalize on them when they fall.

Tables and tickets are still available for the 2017 IVCA Awards dinner, December 4th, 2017, at the Four Seasons in Chicago. Click here or contact Kathy Pyne directly at [email protected] or 312.241.1620.